Navigating event cancellations
The association and not-for-profit sector has encountered a number of unforeseen issues since the greater impacts of coronavirus were felt globally. Along with mass redundancies across all sectors, many associations have been forced to cancel major conferences, meetings and events.
The following notes have been drafted by Matt Crouch Legal and cover a few considerations about the legal implications of event cancellations, which was discussed in a webinar with Associations Forum on 25 March 2020.
By Matt Crouch
Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Matt Crouch Legal Pty Limited are members of the Scheme.
- Important note:
Matt Crouch Legal Pty Ltd and the Associations Forum advise that the contents of these notes are for general information only and do not constitute legal or financial advice. These notes are distributed on the condition that you do not rely on them as legal advice. Every case will be different and will depend on its specific facts and you should always seek legal advice in relation to any particular events or contracts that you or your organisation may have.
2.1 The ban on gatherings of 100+ indoors and 500+ outdoors is to be legally enforced. I have read, though it's hard to find a definitive source, that the ban endures to mid-June at least. It may be lifted earlier or it may be extended – we just don't know.
2.2 Many associations cannot now hold national conferences or other events such as PDs and social events. Especially hard because many associations rely on their events to fund operations.
2.3 Even AGMs are threatened if they have to be in person (see your constitution – though virtual meetings are usually permissible and extensions of time can be obtained).
- A calm and methodical approach is needed if your event is cancelled or under threat.
All associations need to:
3.1 Have a basic understanding of the law;
3.2 Examine current event plans and contracts and NEGOTIATE where possible!
3.3 Examine future event plans and contracts and modify where appropriate/necessary
- The basics of the law
4.1 The law is complex and multi-layered. In all cases, you need to consider:
(a) Common law rule of "frustration of contract" applicable throughout Australia;
(b) Effect of statutes, but only in 3 states – NSW, Vic and Shareholders' Agreement; and
(c) Content of contracts.
4.2 Common law rule of frustration: If your contractual obligations become impossible to perform, radically different, or if the "subject-matter" of the contract is destroyed, the contract is "frustrated":
(a) Applies throughout Australia but has a narrow application.
(b) Effect is only to discharge parties from future obligations.
(c) Contract is not void from the beginning.
(d) Generally, will not entitle or give rise to refunds or other financial adjustments.
4.3 Does coronavirus ban qualify as a frustrating event? If your event is within the period of the ban – I believe, YES. It will be unlawful to hold it and fines may apply.
Note that: Even if the ban is lifted, if the coronavirus is still with us to any material degree, any business that proceeds with a meeting (and someone is infected) would be exposing itself to:
- claims that the duty of care had been breached; and
(b) prosecution for breach of WHS laws.
For these same reasons, even smaller gatherings than those currently banned may need to be cancelled.
4.4 Statutes in 3 states – NSW (Frustrated Contracts Act 1978), Vic (Australian Consumer Law and Fair Trading Act 2012) and SA (Frustrated Contracts Act 1988). These statutes vary to some degree, but all modify the common law rule by providing for refunds if contracts are frustrated. They also make provision for the courts to order financial adjustments between the parties if value has been received. But:
(a) They all rely on a finding that the contract was frustrated – so, back to the common law, narrow application;
(b) They are narrowly prescriptive in their primary effect – ie, refunds with the possibility only of a court ordering appropriate financial adjustment.
(c) The statutes will thus rarely provide balanced outcomes, appropriate to long term event planning, where much work will be done and many deposits and instalments paid in the long lead times;
(d) Most importantly, in each case the parties can "contract-out" of the statute. The language in each statute is different on this. In NSW it may be necessary for a contract to expressly state that the Act does not apply. In Shareholders' Agreement and Vic, it may be enough to deal expressly with "force majeure" and its consequences; and
(e) Going to court will be an expensive, uncertain and time-consuming and courts will not provide answers for, perhaps, years…
- Existing contracts: If your association has contracts in place for an event that now cannot proceed because of the ban, or may not be possible because of the virus even if the ban lifts, you will need to form a judgement about the legal position – or take legal advice. It's complex!
5.1 The law may entitle you to a refund or require you to give a refund.
5.2 If you are prepared to go down the road of a legal dispute to enforce your legal position, you face an uncertain, a costly and delayed outcome.
5.3 Check insurance if you have it…
5.4 Know your legal position and get advice – then apply "the 3 N's" – negotiate, negotiate, negotiate! Far better to reach an amicable and balanced solution with your members, your external event manager or PCO, your venue and other suppliers.
5.5 Negotiate EARLY!
5.6 If there's a happy compromise, document it properly – with professional legal help.
5.7 Look to postpone the event rather than cancel outright. Where possible seek agreement to preserving the financial position – ie:
(a) leave monies you have paid with the supplier if you are not concerned about supplier's solvency;
(b) retain monies you have received to be credited against the postponed event, and
(c) consider placing money paid/received in trust.
(d) Remember – this requires further agreement! Unless your legal position is clear, you may not be able to unilaterally force adjustments and alternative arrangements on members or suppliers.
- Future contracts: As the laws are complex and as the contract content can prevail anyway, have your future event contracts modified by your legal adviser to include an appropriate force majeure clause. Most contracts are deficient – but the current crisis is unprecedented, so it's not surprising… A good clause will:
(a) properly contract-out of the statutes
(b) define the force majeure triggers; and
(c) set out the consequences of force majeure cancellation or postponement – eg, refunds, payments or retentions for value received, etc. Consequences may differ depending on timing of cancellation or postponement…
- What else can associations do?
Associations should consider:
- A levy on the members – eg, an increase in annual membership fees. Possibly, but members may be feeling the strain as well;
(b) Borrow? Possibly, but the banks may be reluctant to lend without additional security.
(c) "White Knight" sponsors? "Help us get through this and we'll promote you for the next 5 years!"
(d) Negotiation – the "3 Ns" are our best hope of getting through the crisis with a viable sector and good relationships intact!
- FINAL MESSAGE:
We are all in this together! If we want viable associations, a viable events sector and good relationships with both members and suppliers when this crisis ends, we need to approach this in a spirit of collaboration and "give and take".
Small businesses, if we all play "hard-ball", may go to the wall. If this happens to a critical mass – a disastrous domino effect may ensue.
Matt Crouch, Principal,
Matt Crouch Legal
Email address: email@example.com